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If, after retirement or reconstitution, a continuing partner’s new profit-sharing ratio becomes lower than his old ratio, what is the difference between the old and new shares called?

Answer and explanation

Correct answer: Sacrifice

When a continuing partner’s new share is lower than his old share, he gives up a part of his profit share. Therefore, sacrifice = old share − new share. Gain applies when the new share is greater than the old share. In examinations, an increase in share indicates gain, while a decrease indicates sacrifice.

Related tags

Sacrifice RatioGaining RatioPartner RetirementProfit Sharing RatioPartnership ReconstitutionNew RatiosReconstitution Retirement Or Death Of A PartnerAccountancy

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